Buyer should withhold tax from sum paid to a non-resident co-owner to acquire a house property

Where assessee purchased a property jointly owned by co-owners, in view of fact that one of co-owners of property was a non-resident, assessee was required to deduct tax at source under section 195 to extent sale-consideration paid to said co-owner.

Facts:

a) The assessee purchased a property owned by two co-owners for a total consideration of 1.20 crores. One of the co-owner was a non-resident who had executed a General Power of Attorney in favour of other resident co-owner to execute sale agreement;

b) The AO opined that since one of co-owner was a non-resident, assessee was required to deduct tax at source under section 195 on entire sale consideration of Rs 1.20 crores. On assessee's failure to deduct tax at source, the AO treated the assessee as 'assessee-in-default';

c) On appeal, the CIT (A) held that assessee ought to have deducted tax at source on the share of the non-resident in the sales consideration. Aggrieved assessee filed the instant appeal.

The Tribunal held partly in favour of assessee as under:

1) To the extent the sum was paid to non-resident co-owner, the provisions of section 195 were attracted and the assessee ought to have deducted tax at source while making payments to her;

2) Thus, the assessee could be considered as an 'assessee-in-default' only to the extent of sum paid to the non-resident - R. Prakash v. ITO [2013] 38 TAXMANN.COM 123 (Bangalore –Trib.)